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Telecom Order CRTC 2004-127

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Telecom Order CRTC 2004-127

TELUS Communications (Québec) Inc.

Centrex service restructuring

1.

The Commission received an application by TELUS Communications (Québec) Inc. (TELUS Québec), dated 19 February 2003 and amended on 16 October 2003, to restructure its Centrex service by revising General Tariff item 2.01, Basic Service and Extended Area Service, and item 2.18, Centrex business service.

Bell Canada's and Négotel's comments

8.

Bell Canada and Négotel expressed a number of concerns regarding the proposed Centrex rates. Bell Canada submitted that the preferential rates for subscribers who use TELUS Québec as their PIC would be unduly discriminatory against competitors in the long distance market and would also reduce the margins available to resellers. Bell Canada opposed TELUS Québec's proposed introduction of rate bands, noting that the proposed Centrex rates by band were only marginally different from TELUS Québec's rates for business individual line service. Négotel opposed TELUS Québec's proposed inclusion of optional features as part of the Centrex rate, arguing that customers should only have to pay for what they need. Bell Canada submitted that the proposed tariff was unclear as to the rates that TELUS Québec would charge a customer.

9.

Furthermore, Bell Canada and Négotel argued that the proposed Centrex rates provided insufficient discounts to allow resellers to operate. As a result, Bell Canada and Négotel requested that the Commission order TELUS Québec to provide a tariff with sufficient discounts to its rates to enable Centrex resale.

10.

Additionally, Négotel opposed TELUS Québec's request to rescind previously grandfathered Centrex rates for existing contracts. Négotel indicated that it could not increase its customers' rates due to contractual obligations and that if TELUS Québec were allowed to rescind grandfathered rates, Négotel would be forced to operate at a loss. Négotel submitted that rescinding grandfathered Centrex rates would force it to cease operations and withdraw from the resale market.

11.

Finally, Bell Canada argued that TELUS Québec's request for retroactive approval of the proposed rates should be rejected as it was contrary to the Commission's authority.

TELUS Québec's reply comments

12.

TELUS Québec stated that Bell Canada provided discounts to customers who chose Bell Canada as their PIC and argued that it should be allowed to do the same. TELUS Québec submitted that its proposed rate structure would ensure that rates are compensatory in each band and argued that the proposed rate band structure was appropriate in view of the significant cost differences in providing Centrex service within each of its bands. TELUS Québec agreed, however, that its tariff was unclear as to what rates it would charge a customer ordering lines across different rate bands. Consequently, TELUS Québec proposed to modify its tariff to indicate that it would use the total number of lines across all rate bands to calculate the rate within a specific rate band.

13.

TELUS Québec also submitted that no other incumbent local exchange carrier (ILEC) provided wholesale Centrex rates for resellers. TELUS Québec submitted that its Centrex restructuring was based primarily on its costs and its customers' profile. TELUS Québec noted that 99% of its Centrex customers had less than 250 lines and that 95% had less than 25 lines.

14.

TELUS Québec argued that it should be allowed to rescind its grandfathered Centrex rates since many of its grandfathered rates did not recover costs, especially in rate bands B and C.

15.

TELUS Québec defended its request for retroactivity, stating that it dated back to its request for interim approval of Tariff Notice 341. TELUS Québec submitted that retroactivity would also minimize the impact that the restructuring would have on its customers.

Commission analysis and determination

In Implementation of price regulation for Télébec and TELUS Québec, Telecom Decision CRTC 2002-43, 31 July 2002 (Decision 2002-43), the Commission classified Centrex service as an uncapped service. Uncapped services are not subject to a rate element constraint. Accordingly, the Commission finds that TELUS Québec's proposed rates for Centrex service are consistent with its determination in Decision 2002-43.

18.

The Commission notes that it has not previously considered rate discounts for subscribers who select a specific ILEC as their PIC to be unduly discriminatory against competitors in the long distance market. The Commission also notes that it has previously approved rate discounts for subscribers who select a specific ILEC as their PIC and the introduction of rate bands for various access services, as well as the inclusion of certain optional services as part of a Centrex service, for other ILECs. The Commission considers that TELUS Québec's proposed tariff is unclear as to how it would calculate rates for a customer ordering lines across different rate bands. The Commission considers that the wording necessary to clarify this point should be included in the issued tariff pages.

19.

The Commission notes Bell Canada's and Négotel's request that TELUS Québec be required to provide a Centrex tariff with sufficient rate discounts to enable Centrex resale. The Commission notes that in Local competition, Telecom Decision CRTC 97-8, 1 May 1997, it concluded that it would not be appropriate to require the ILECs to sell local services at wholesale rates. On that basis, the Commission considers that it would not be appropriate to require TELUS Québec to sell Centrex service at significantly discounted rates as requested by Bell Canada and Négotel.

20.

The Commission notes TELUS Québec's request to rescind previously grandfathered Centrex rates for existing contracts. The Commission notes that in Centrex lines, Telecom Order CRTC 2002-98, 19 February 2002 (Order 2002-98), it grandfathered 3, 5 and 6 year Centrex contract options for TELUS Québec's existing customers until the end of their contracts at TELUS Québec's request. Moreover, the Commission considers that rescinding the grandfathered Centrex rates would have a negative impact on some of TELUS Québec's customers. Consistent with its determinations in Order 2002-98, the Commission concludes that TELUS Québec's grandfathered Centrex rates should remain in place until all existing customer contracts have expired.

21.

In regard to TELUS Québec's request for retroactivity, the Commission notes that TELUS Québec's Centrex rates have been approved on a final basis. The Commission also notes that, in CRTC denies application by Call-Net and AT&T Canada for a refund of amounts paid for direct connection service, Order CRTC 2001-137, 14 February 2001, the Commission considered that retroactively adjusting rates, which had previously been granted final approval, would create uncertainty as to the finality of Commission decisions. The Commission went on to state that as a matter of regulatory policy, rates approved on a final basis should not generally be subject to adjustment.

22.

The Commission notes that it did not consider it appropriate to grant interim approval to Tariff Notice 341, as doing so would have allowed TELUS Québec to rescind its grandfathered Centrex rates. The Commission considers that TELUS Québec's request for retroactivity does not involve special circumstances that justify making an exception to its policy of denying retroactive requests when rates are approved on a final basis. Accordingly, the Commission does not find it appropriate to approve TELUS Québec's request for retroactivity.

23.

In light of the above, the Commission approves TELUS Québec's proposed Centrex restructuring, on a prospective basis, with the following exceptions: